U.S. Labor Productivity Growth Unexpectedly Downwardly Revised In Q4

Revised data released by the Labor Department on Thursday showed U.S. labor productivity increased by less than initially estimated in the fourth quarter of 2019.

The report said labor productivity climbed by 1.2 percent in the fourth quarter compared to the previously reported 1.4 percent jump. Economists had expected the pace of productivity growth to be unrevised from the initial estimate.

The increase in productivity in the fourth quarter came following a 0.3 percent drop in the third quarter, which was downwardly revised from a previously reported 0.2 percent dip.

The weaker than previously estimated productivity growth in the fourth quarter came as output surged up by slightly less than initially estimated and hours worked jumped by slightly more than initially estimated. Productivity is a measure of output per hour.

The Labor Department said output surged up by 2.4 percent compared to the previously reported 2.5 percent jump, while hours worked climbed by 1.2 percent compared to the previously reported 1.1 percent increase.

A note from economists at Oxford Economics said the revised productivity estimate for the fourth quarter confirmed that productivity growth likely reached a cyclical peak last year.

“Despite last year’ cyclical upswing, productivity growth continues to be constrained by structural factors such as a slow diffusion and adoption of technologies and declining business dynamism,” the economists said.

They added, “With business investment trends still weak and economic momentum likely to slow materially due to the coronavirus, productivity growth is unlikely to make further headway.”

The report also said unit labor costs rose by 0.9 percent in the fourth quarter, reflecting a notable downward revision from the originally reported 1.4 percent spike. The increase in labor costs was also expected to be unrevised.

The latest data also showed a substantial downward revision to unit labor cost growth in the third quarter, with labor costs edging up by just 0.2 percent compared to the previously reported 2.5 percent spike.

In the fourth quarter, hourly compensation jumped by 2.1 percent compared to the previously reported 2.8 percent surge.

Real hourly compensation, which takes into account changes in consumer prices, dipped by 0.2 percent compared to the previously reported 0.3 percent increase.

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